Crisis and Innovation: Let the Bad Times Roll

Innovation appears to flourish in agencies under extreme pressure.

John D. Donahue is a GOVERNING contributor. He is the Raymond Vernon Lecturer in Public Policy, faculty chair of the Harvard Kennedy School Case Program and the SLATE teaching initiative.

For its first several years, the Harvard Kennedy School program to celebrate public-sector breakthroughs was called Innovations in State and Local Government. In the mid-1990s eligibility was opened to federal applicants, though without any expectation that hidebound Washington would generate much in the way of innovation. But federal entries actually won a big share of the awards in subsequent years.

Like just about everybody else, I was surprised by this, and decided to explore what was going on. With the help of a team of research assistants, I produced a book called Making Government Work that profiled the story behind each of the 14 programs that won Innovations in American Government awards in the first five years of federal eligibility.

I had a hunch about what the evidence would show. My prediction was that most innovations would be associated with relatively large, relatively sudden increases in resources. The previous decade had featured wild swings in program budgets as the course of events and shifting ideological tides brought different missions in and out of favor. I imagined that a fresh flood of dollars would, at least temporarily, free agencies from the hand-to-mouth austerity that tends to cement in place the governmental status quo. Public servants with ideas for creating more public value would briefly have the wherewithal to realize their ambitions.

After all, this is basically how it happens in the business world -- which government is constantly urged to emulate. Investors looking to unleash the next big thing put up serious grubstakes so that inventors and entrepreneurs have the time, staff and resources they need to make it happen. Whether stand-alone startups or "skunk-works" within established firms, private-sector innovators are seldom expected to take responsibility for keeping the old model cranking along while they're dreaming up the next version. Investors are ruthless about demanding results eventually, but in the short run they know innovators need some slack.

In normal times, such slack is exceedingly rare in government. Any extra resources are instantly deployed to urgent needs, and if not used, snatched back by budget offices. But perhaps in abnormal times -- when an agency's mission catapults to the top of the political priority list and the budget exceeds expectations -- there will be a fleeting moment when budgetary bounty permits experimentation and creativity. Such moments, I hypothesized, would be the sources of federal innovation. Follow the money -- the upticks of money --and you'll find the fresh approaches.

My hypothesis turned out to be a complete dud. Reviewing the award recipients, we found zero evidence that governmental innovations spring up when resource constraints are relaxed. To the contrary, most of the award winners came from agencies under extra pressure. Glaring gaps between an organization's mission and its actual performance -- often coupled with explicit high-level pledges of improvement -- made the status quo untenable and empowered the latent change agents who populate almost every public agency.

Rethinking operations from the ground up is hard work. Every aspect of every program has its defenders, most of them presenting perfectly reasonable claims why any proposed change is inadvisable, impossible or illegal. After all, every procedural requirement or prohibition reflects somebody's cherished priority, and arose to address some particular problem. Proposing almost any big change will cost you friends and win you enemies. Most people, most of the time, prefer to concentrate on making existing systems work as well as possible.

Big change happened in the agencies we examined when performance shortfalls became intolerable internally -- when they seared the self-respect of officials and employees -- and when there was no prospect of dulling the pain with a budget boost. That's when leaders became desperate enough to listen to the oddballs, liberate the misfits and try some long shots.

Cities and states -- their backs to the wall as the fallout from the fiscal crisis ravages budgets -- seem to be following this pattern today. A front page New York Times column by Monica Davey highlighted the big changes being spurred by hard budget times. Pewaukee, Wis., a small town with a big budget deficit, figured out that it could get along without its own police department by contracting with the county sheriff. Michigan has consolidated, streamlined or cut enough functions to pare its roster of organizations by nearly one-quarter. Missouri is exploring ways to merge its higher-education agency with its heretofore entirely separate secondary-education agency. All across the country ideas that were too crazy to consider a few years ago are getting a respectful look.

It would be nice, of course, if there were less angst and trauma associated with public-sector innovation. But aspiring change agents who aren't ready to ride these rapids might think about switching to the private sector. And those tough enough to stay in government should seize the moment to make their move. After all, good times might be just around the corner.